Germany to take full ownership of key gas player SEFE after EC approval

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Germany is to take full ownership of key gas market player SEFE — formerly Gazprom Germania — to ensure German gas supply security, the economy ministry said Nov. 14, following EU approval of a state aid package.

The German regulator, Bundesnetzagentur, took on the temporary role of trustee SEFE shareholder in early April after Berlin said it had not approved its sale by Gazprom to a third-party company called Palmary.

The Bundesnetzagentur trusteeship is due to expire in December, but the German government is now set to take full ownership with a Eur225.6 million ($232.2 million) aid measure.

In a statement Nov. 14, the German economy ministry said it had ordered the capital measures to be taken to complete the transfer.

It said it was taking full ownership of SEFE given its “over-indebtedness” and threat of insolvency, which would endanger the security of supply in Germany.

“In order to avert this danger and to maintain SEFE’s operations, the change of ownership is now being completed and the company is being stabilized,” the ministry said.

It said business partners and banks did not want to enter into new relationships with SEFE while the ownership structure was unclear.

“Due to the importance of SEFE for energy supply in Germany, the government is now clarifying the ownership structure through capital measures,” it said.

On Nov. 12, the European Commission said it had approved a German aid measure to support SEFE, currently placed under the trusteeship of Germany.

“The measure will allow the German state to take the 100% ownership of SEFE, replacing Gazprom Export, in order to safeguard the security of gas supply to the German economy,” it said.

Financial hit

SEFE, along with other German gas buyers such as Uniper and VNG, has been hit hard by curtailed Russian gas supplies.

Moscow in May listed SEFE and dozens of its subsidiary companies in a new sanctions designation as a response to EU measures against Russia.

The move prohibited Russian entities from dealing with SEFE and its subsidiaries, including the delivery of Russian gas to its trading subsidiaries.

That meant SEFE had to look for replacement gas volumes at higher cost on the open market to meet its customer demand.

The German government in June also approved a loan to SEFE via state bank KfW to help the company avoid insolvency amid high European gas prices.

The economy ministry said Nov. 14 that the KfW loan, which had totaled Eur11.8 billion, would now be increased to Eur13.8 billion.

“Substantial parts of the Eur13.8 billion KfW loan are to be converted into equity capital by contribution to SEFE’s capital reserves,” the ministry said.

The measures will be financed from Germany’s Eur200 billion Economic Stabilisation Fund.

European gas prices hit record levels in late August as Russia choked gas supply, halting deliveries to Germany via Nord Stream having already suspended flows in the Yamal-Europe system and cutting exports via Ukraine.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at a record Eur319.98/MWh on Aug. 26.

Prices have weakened since then on healthy gas storage levels and demand curtailments, with Platts assessing the TTF month-ahead price on Nov. 11 at Eur98.48/MWh.

Russian unreliability

Margrethe Vestager, EC executive vice president in charge of competition policy, said Gazprom’s disruption of gas deliveries showed Russia’s unreliability as a supplier.

“Many importers of Russian gas, with fixed delivery contracts concluded with customers before the crisis, are currently not being served,” Vestager said.

“Any disorderly failure to fulfil these fixed contracts can have severe consequences for customers and for the German economy,” she said.

“So, we welcome the change of ownership of SEFE, which will enable Germany to search for new gas suppliers while ensuring security of supply.”

The EC said SEFE played a key role in the German gas market, the biggest in the EU.

It has a 14% share of German gas supply and is active also in other member states.

It also owns and operates 28% of the gas storages serving the German market and owns gas pipelines in Germany and other EU member states.

The EC said that following Russia’s invasion of Ukraine and the subsequent disruption of gas deliveries by Gazprom, SEFE incurred “serious” losses.

“To continue business relations with market participants and thus to be able to keep serving its customers, Germany intends to assume full ownership of the company,” it said.

Under the planned measure, the existing registered capital of Eur225.6 million will be set to zero, which will de facto end the ownership of the Russian shareholder.

SEFE will then issue new ordinary shares to the same nominal amount. The measure will therefore not change the equity of SEFE and the new shares will be subscribed by Germany, the EC said.